Fresh A400M charge clouds strong Airbus 2017 profits

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Fresh A400M charge clouds strong Airbus 2017 profits



PARIS (Reuters) – Airbus took a 1.3 billion euro ($1.6 billion) hit on its delayed A400M military transport plane, lifting charges on Europe’s troubled defense project above 8 billion euros and clouding higher than expected underlying profits and cash.

Shares in Europe’s largest aerospace group gained 9 percent as it lowered costs on its new A350 jet and confirmed it was looking at raising output of the best-selling A320 model by 17 percent to 70 a month, amid strong demand.

But it called on its engine makers to get to grips with delays that have disrupted deliveries of the upgraded A320neo and said its target of 800 total deliveries this year would depend on the performance of these suppliers.

“We have plenty of challenges going forward, but it is manageable,” Chief Executive Tom Enders said on Thursday.

Airbus posted an 8 percent increase in adjusted 2017 operating profit of 4.253 billion euros on flat revenues of 66.767 billion euros and predicted a 20 percent rise in the widely watched core profit item.

Analysts were on average expecting adjusted 2017 operating profits of 3.996 billion euros and revenues of 67.343 billion.

The company lifted its dividend by 11 percent.

The A400M charge comes after Airbus last week reached a provisional agreement with seven European NATO buyer nations over further delays for the new troop carrier..

“This certainly ain’t pretty but we are making good progress overall,” Enders told analysts, adding the deal would significantly reduce remaining risks.

On the commercial side, Airbus is in the midst of a switchover to an upgraded A320, but has been beset by delays in engine supplies mainly from Pratt & Whitney as well as some delays at engine maker CFM International.

ENGINE DELAYS

The company said it was still looking at the impact of a fresh round of problems with Pratt engines that saw some jets grounded and certain deliveries halted this week.

Enders said he had been in touch directly with the heads of Safran and General Electric, the owners of CFM which has reported delays of several weeks in engine deliveries.

The planemaker, which competes with Boeing, reported “good progress” on production of the new A350 wide-body jet and reiterated plans to reach output of 10 a month by end-year.

In a respite from recent compliance rows, Airbus said it had reached agreement with European credit agencies allowing it to apply for export credits on a case by case basis. The funding was suspended in 2016 when Airbus acknowledged having made misleading applications, triggering a corruption investigation.

However, it also raised the prospect for the first time that the United States could be drawn into the Anglo-French probe, saying it had been asked to supply information to U.S. authorities about conduct under their jurisdiction.

Airbus also took a 117 million euro fourth-quarter charge following a settlement with German prosecutors over a corruption case linked to a fighter sale to Austria in 2003. The charge includes 35 million euros of ongoing legal costs.

Reporting by Tim Hepher; Editing by Sudip Kar-Gupta and Keith Weir

Our Standards:The Thomson Reuters Trust Principles.



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